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Here is some insight into FKCM from an analyst taken from Stock-Line (insight into the company is from the middle on): This file created 8:14 PM 2/19/97 by Claris Home Page version 1.0 <P><!-- Comments go here -- Created: 9/29/96 6:28:31 PM We're dedicated to bringing you, the Stock-Line community, the very best investment ideas. Stock-Line will be bringing you exclusive interviews with the best investment minds on, and off Wall Street. Today we present an exclusive interview with Phil Piper, of Redstone Securities. Phil has discovered a very promising stock that we think you should know more about... Phil Piper began his career at Morgan Guaranty Trust Company as a bond trader. He then became head bond trader Mellon Bank, where he was in charge of all muni bond trading nationwide. Phil held a number of senior positions including, President of Garvin Municipal Brokers. Since 1987 he has been a Registered investment Advisor, and is currently an investment banker at Redstone Securities in New York. Phil, tell us about your investment philosophy. Buy good companies when they become attractive to buy. Two examples in the computer industry were Compaq and IBM. Their valuations were crushed. After restructuring these companies have turned around and done very well. Other examples include drug stocks such as Merck (MRK) and Bristol Myers (BMY) during the healthcare reform talks. The stocks were devalued by 60-70%, and the stocks have turned around and done tremendously. Were you a buyer then? Yes. Obviously no one ever buys at the bottom or sells at the top. The vast majority of what you buy should be large cap stocks and , bonds, depending of course on the investors age and tax position. Small cap stocks should be part of a portfolio, if you can accept the risks. There are a number of small-cap stocks that have gone from $5 to $1 because the story did not prove out. You need to take a long term outlook, but make short term reviews. That means making sure the company is doing what they said they were going to do, if they are , then stick with the stock. If not, then move on to something better. I like to find the stocks that go from $1 to $5. I look for timing opportunities. Situations where a significant fundamental change has taken place - which will have a dramatic, and positive result on the company's earnings outlook. These are not opportunities where you make 50-70% on your money - these are opportunities where you can make six, eight times,or more on your money. You look for fallen angels, and turnaround stories ? You can call them fallen angels. These are usually companies where the previous management has not been effective, and new management has come in. Phil, give us an example. I have been following this company for five years. It is actually an investment banking client of my company, Redstone Securities. The Company is Franklin Consolidated Mining Company (NASDAQ: FKCM). It is a mining company located in Colorado. It has been in existence over 20 years, and NASDAQ listed for about as long. It was originally managed by a group of people who were perhaps more academically oriented than actual mining operators. They had, as it turns out, reasonable knowledge of the industry, but they lacked funding, and certain skills to make the company a profitable, and viable entity. Several years ago the previous management formed a joint venture with a group out of California,Gems and Minerals Corporation, who were able to provide financing, and operational expertise. The joint venture received the rights to mine the Franklin Mine, a very large ore body mine in Idaho Springs Colarado. In order to go into full scale production they had to go through enormous, literally mountains of legal, engineering and enviornmental paperwork, and compliance. As you know Colorado has a strong enviornmental lobby, and it is very difficult to put a mining operation online. Franklin is a permitted mining operation.</P> So what your saying is, the Gems joint venture will drive the stock price? Gems announced in June 1996, that they acquired the Mogul mine, which Franklin, through a series of agreements which include processing the ore, currently has a 20% interest. This is a high quality, high grade gold mine, and that is where the focus of the operations is right now. It is a smaller ore body, but contains higher gold assays. Their target is 1ounce of gold per ton, and to mine 200 tons per week. So Franklin is now operational. When did they actually start operations? They started operating in November, 1996. As is the case, with most ventures, it was a start-stop situation. They have gotten most of the kinks out, and are now working on moving production to higher levels. They are adding equipment, and the goal is to mine 500 tons per day. The Franklin mine will be coming online by late Spring. The quality of that ore is lower, but the ore body is much larger. So Franklin will have two mines feeding its milling operation. For the first time we expect to see consistent revenues coming out of Franklin. So finally after 20 years Franklin is on the threshold of generating revenues,and becominga"real"company The stock is trading atabout $0.09, there are 90 million shares outstanding, with 50 million in the float, although the actual trading float is probably about 5 million shares. The whole company is valued by the market at only about $8 million. What do you think Franklin is worth? As an operating company Franklin's stock is worth a lot more than what it is trading at today. Franklin has 167,000 tons that have been certified as proven reserves. That represent about $25 million of gold, at current prices. Franklin's cost of production is about $100 per ton - representing profit potential, conservatively, of about $230 per ton, depending on gold prices. Franklin has little debt. They don't need tremendous amounts of money to ramp up operations. They have been through the permit process. Now they need to consistently operate and increase their production. Franklin has significant assets that do not show up on the balance sheet. One of those assets is that it is the only permitted mining operation in this mining region. A NASDAQ listed company has a value in an industry where many mining companies are listed only on foreign exchanges, or the OTC Bulletin Board, where listing requirements are not as stringent. Give us your earnings estimates. I think that Franklin can earn $2 to $5 million this year. That's .02 to .05 earnings per share. I think that those earnings could attract a strong multiple, because Franklin is a low cost operator. Where could the stock be trading in the next 6-12 months? The stock should clearly be trading at .25 cents today, based on reserves, permits, and operations. Twelve months from now I expect $2 to $5 million in earnings. If acquisitions are made the asset base could triple from the current $6 million. Franklin has had so many starts and stops,and so many people have been disappointed over the last 20 years that as a result the stock has been trashed, and is now severely undervalued. The bottom line is Franklin is alive, they have gold, they are able to mine that gold economically. This is not like a $10 stock that, if things don't go right, will drop to $2.00. This is a $.09 stock where all the bad news, and disappointments are behind it and the future is looking bright. Additional Disclosure: The information contained herein has been provided by services we believe to have represented this information honestly and accurately. Redstone Securities is a registered Broker Dealer with the NASD and a market maker in Over The Counter stocks including FKCM. | ||||||||||||||
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